Common mistakes entrepreneurs make

THE THRILL of starting a new company can hamper an entrepreneur's ability to keep a clear head about all aspects. See these common mistakes entrepreneurs make:

Deadlocked partnerships

Creating an equal partnership seems fair in theory and typically works well when a business in first starting up. However, sooner or later disagreements arise and the company can be left in limbo because no partner has the final say. Eventually this will erode the company’s growth.

It is wiser to give a managing partner ultimate control and a majority ownership stake – even if it’s only 51%. Another option for entrepreneurs is to grant a small ownership percentage to a third party advisor who will serve as the tie-breaker in deadlocked decisions.

Optimism vs realism

Being unrealistically optimistic can inflate sales projections, shorten product development timelines and minimize expected costs. It is important for businesses to check and re-check their financial assumptions in a venture and only proceed when capitalisation can support the worst-case scenario.

Low margins

Companies should charge the highest prices their markets will allow. Too many entrepreneurs attempt to make up for low margins with high volume. This strategy rarely succeeds, especially for service-based companies.

One big customer

If companies depend upon a single customer for more than 50% of their company’s revenue, they may be headed for a meltdown. It may be easier to manage one or two big customers, but that makes companies vulnerable to business failure if they lose a major customer, instead of being able to respond quickly by increasing sales to other, smaller customers.

No market

Some companies put all their efforts into an idea and then develop a product or service, only to find there is no viable market for it. It is a mistake to create a product or service offering that has to work on finding a market. It is crucial to perform market research in advance to determine whether anyone will buy what is being sold.

Speed vs perfection

Many entrepreneurs spend too much time and money trying to achieve perfection with their product. Even if the company did finally make the perfect product, the market will change and the product will become obsolete. Instead, bringing a less-than-perfect product to market quicker can help a company establish itself and become profitable faster.

Split focus

Small business owners often lose focus on the company’s core business aims. Concentrating efforts in a limited area almost always produces better results than diversifying.

* Harry Welby-Cooke is a leading business and executive coach and South Africa’s master licensee for global franchise company ActionCOACH.